NEW YORK (MaceNews) – Philadelphia Fed President Patrick Harker Wednesday repeated the familiar line that policy is on hold and is likely to remain so, barring a “substantial change” in the outlook, and added that financial stability concerns are another factor arguing against more policy accommodation.
“For now we are on hold,” Harker said in response to a question about whether the Fed should act to boost inflation, at an event sponsored by OMFIF. “We are in a good place, so let’s just stay here and let things work out. If there is a substantial change, and we really start seeing inflation move more rapidly in the wrong direction, then we should take action.”
Harker added that he is “a little skeptical” that additional monetary accommodation would boost inflation, given the array of factors holding inflation back, including automation that is depressing average wages, and he said “a big part of the economy just doesn’t move much” in response to Fed policy.
Uncertainty, including the trade and immigration picture, continues to restrain business investment, and the overall economy, and this makes it harder for policy-makers to understand the outlook, and what will give rise to more robust inflation, Harker said. “We don’t quite know what the inflation dynamics are. We have to be humble,” he said.
Asked how financial stability concerns figure in the Fed’s thinking, Harker said these worries come up at every meeting. “There are clearly concerns that staying low for long does create excessive risk-taking,” he said, adding, “It’s something you clearly have to take into account. That’s why, for example, I personally am on hold, I don’t think we need to move rates in any direction, I don’t think we need to take rates lower right now. I am concerned about some of these financial stability issues.”